Q: I am a California state court receiver in a family law case. The divorcing couple owns property in Virginia and Michigan. I know, generally, that in order for me to sell the property I would have to be appointed ancillary receiver in each state. Is there a cheaper, more efficient, way for me to sell the property without being appointed ancillary receiver and having to deal with three courts.

A: There might be. The reason an ancillary receiver is generally needed for a receiver to deal with out of state assets is because a state court receiver’s authority is restricted to the territorial jurisdiction of the appointing court. As Clark states: “An order appointing an equity receiver derives its efficacy from the sovereignty which created the court and cannot, therefore, directly operate on property outside the boundaries of the sovereignty which created the court.” 1 Clark on Receivers, §294.3 (3rd Ed. 1959). See, Booth v. Clark, 58 U.S. 322 (1854), Melvin v. Carl, 118 Cal. App. 249 (1931). Clark notes, however, that if the title holder executes a deed transferring the property to the receiver, the receiver can deal with and sell the out of state property because he is then the owner. Clark, supra. at §294.9. In Rozan v. Rozan, 49 Cal. 2d. 322, 330 (1957) the California Supreme Court recognized this rule stating: “A court in one state cannot directly affect or determine title to land in another.” It went on, citing numerous cases: “It is well settled, however, that a court, with the parties before it, can compel the execution of a conveyance in the form required by the law of the situs and that such a conveyance will be recognized there.” Id.; Beeler v. Beeler, 193 Cal. App. 2d 548, 549 (1961) (“ But the law is well settled that when the court has jurisdiction over the parties it can require them to execute conveyances to lands in another state in order to effectuate its decree relating to the respective rights of the parties to the property.”). Therefore, if the parties to the case are cooperative, have them execute deeds transferring title to you as receiver. Once title is in your name, you can deal with the property as any other owner can. If one of parties refuses to voluntarily execute the deeds, you can ask the court to order them to do so, based on the above authority, in order for you to efficiently deal with the property. If the party still refuses to execute the deeds, the court has the option of holding them in contempt until they do so, or appointing an elisor to execute the deeds on their behalf. Blueberry Properties LLC v. Chow, 230 Cal. App. 4th 1017,1020 (2014).

          This is all consistent with the underlying concept that a receiver’s sale does not convey “legal” title, but rather good equitable title, enforced by an injunction against suit, and a state court injunction is only enforceable in the state issued. See, SEC v. American Capital Investments, Inc. 98 F.3d 1133,1144 (9th Cir. 1996), abrogated on other grounds, 523 U.S. 83, 93-94 (1998) (“When a court of equity orders property in its custody to be sold, the court itself as vendor confirms the title in the purchaser. Neither the court nor [the receiver] gives a legal title to the purchaser because neither the court nor its officer has legal title to give…A court of equity acts by a process of injunction against the owner and against the parties to the suit and protects the purchaser against interference and assures him quiet title and quite enjoyment.”). Where the party, however, transfers legal title by deed to the receiver, the situation is different, because then the receiver has “legal” title to the property, not equitable title, and can, therefore, deal with it as the owner.

This publication is published by the law firm of Ervin Cohen & Jessup LLP. The publication is intended to present an overview of current legal trends; no article should be construed as representing advice on specific, individual legal matters. Articles may be reprinted with permission and acknowledgment. ECJ is a registered service mark of Ervin Cohen & Jessup LLP. All rights reserved.